Half Year Result 2016 MATRIX COMPOSITES & ENGINEERING Aaron - - PowerPoint PPT Presentation

Half Year Result 2016

MATRIX COMPOSITES & ENGINEERING

24 February 2016

Aaron Begley – Chief Executive Officer Peter Tazewell – Chief Financial Officer

• Overview
• Financial results
• Performance, strategies &

Outlook

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Agenda

• Revenue: $63.4 million (lower output in response to market conditions)
• EBITDA: $7.4 million
• Underlying EBITDA: $9.3 million
• NPAT: $1.1 million
• Net debt position: $4.9 million
• No interim dividend determined
• Zero LTIFR
• Sustained low oil price continues to delay commitments to new projects
• Clear market leader for drilling riser buoyancy
• Continued penetration of non-North American markets for well

construction products

• Order book $56.1 million1 at 31 December 2015
• New LGS™ positively received and provides key point of differentiation,

creating new markets

• Responding to oil price weakness through reduced production, reducing

costs, and ongoing labour and materials efficiencies

• FY16 Revenue forecast reduced to $100 million

Overview – 1H FY16

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Financial Operating Outlook

• 1. Order Book subsequently reduced as outlined in Market Announcement dated 16 February 2016

Overview

Slowing oil and gas market

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WEAKER MACRO INDICATORS AND RESPONSE

• Sustained low global oil prices
• Reduced floater day rates
• Drillships delivery dates delayed
• Floater fleet significantly reduced through retirements and

cold stacking MATRIX INITIATIVES

• Moderated production and capital expenditure
• No interim dividend determined
• Reduced FTEs and increased cost control
• Introduced LGS™ which has a demonstrated value

proposition to E&P

• Continued non-O&G product development

LGS TM is a registered trade mark of AMOG Technologies Pty Ltd. Matrix has the exclusive world-wide licence to commercialise LGS

• Order backlog notionally supports production

throughout FY16

• Order conversions continued despite slowing

market conditions

• Shipyards experiencing delays in floater

deliveries and some cancellations

• Quotation activity continues to decline although

the introduction of LGS™ is expected to generate new equipment sales from the existing floater fleet as contractors upgrade to LGS™

Overview

Order book & pipeline

Order Book & Pending Orders (US$m) as at 31 Dec 2015

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50 100 150 200 Current Orders Pending Orders Quotes - Bid to Contract Q2 FY15 Q3 FY15 Q4 FY15 Q1 FY16 Q2 FY16

1H FY16 Financial Results

CFO – PETER TAZEWELL

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Financial results

Key Financial Metrics

1H FY16 FY15 1H FY15 HoH Var

Revenue

$m

63.4 144.1 78.5 19.2% ↓ EBITDAF

$m

7.9 21.1 12.3 36.1% ↓ EBITDA

$m

7.4 19.5 13.6 45.4% ↓ Underlying EBITDA

$m

9.3 22.7 13.6 31.2% ↓ Net profit/(loss) after tax

$m

1.1 3.6 3.9 71.1% ↓ Earnings per share

c

1.2 3.8 4.1 70.9% ↓ Dividends per share

c

nil 3.0 2.0 n/a Gross Debt

$m

(13.7) (8.0) (10.0) 37.1% ↑ Adjusted Net (Debt)/Cash

$m

(4.9) (7.8) 7.2 n/a Interest Cover

times

29.0 26.9 21.6 34.8% ↑ Operating Cash Flow

$m

(2.4) 6.8 15.2 n/a Employees 189 255 350 46.0% ↓ Backlog

US$m

56.1 93.1 86.0 34.8% ↓

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EARNINGS ANALYSIS

• Reduced revenue attributed to reduced

production

• Earnings adversely impacted by $1.9 million

non-recurring costs, primarily related to redundancies MARGIN ANALYSIS

• Reduced margin attributed to non-recurring

costs

• Underlying EBITDAF margin of 15.5 per cent
• Ongoing raw material and labour efficiencies

achieved

Financial results

Earnings

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20 40 60 80 100 120 140 160 FY13 FY14 FY15 FY16 $m

Revenue

1H 2H 0% 3% 6% 9% 12% 15% 5 10 15 20 25 FY13 FY14 FY15 1H FY16 $m

EBITDAF and EBITDAF margin

1H 2H EBITDAF margin

• Reduced inventory

mitigated by increase in long term receivables

• Reduced payables
• Net working capital

build up with long term receivables and reduced customer deposits

• Reduced term debt,

utilisation of trade finance lines

• Low gearing

$m 1H FY16 FY15 1H FY15 Cash 14.9 14.5 29.1 Trade receivables 21.7 34.5 13.2 Other receivables 12.7

• 9.7

Inventory 15.4 20.7 17.0 Property, plant & equipment 88.5 91.3 94.9 Intangible assets / deferred tax 12.2 12.9 15.5 Other assets 2.0 1.4 1.9 Total Assets 167.4 175.3 181.3 Trade payables 8.3 11.6 15.3 Progress billing 6.1 14.3 11.9 Financial liabilities 14.1 10.2 13.2 Provisions 1.2 1.5 1.7 Total Equity 137.7 137.8 139.2 Adjusted net cash/(debt) (4.9) (7.8) 7.2 Net working capital 35.3 29.3 12.7 Gearing (ND/E) 3.6% 5.4% nm

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Financial results

Balance sheet

$m 1H FY16 FY15

Cash 14.9 14.5 Progress billing (6.1) (14.3) Trade Finance Lines (7.7)

• Term Financial debt

(6.0) (8.0) Adjusted Net Debt (4.9) (7.8)

Financial results

Debt and banking

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CASH AND DEBT POSITION

• Term debt reduced to $6.0 million
• Trade Finance lines utilized ($7.7 million)

demonstrating benefit of flexible debt facility.

• Undrawn available facilities of $24.8 million
• Adjusted net debt at 31 December 2015 of

$4.9 million CAPITAL MANAGEMENT

• No interim dividend determined
• On-market share buyback completed
• 805,428 shares acquired at an average price
• f $0.54, representing 6.6 per cent of all

shares traded over the period the buyback was active

(100) (75) (50) (25) 25 50 75 100

1H FY12 2H FY12 1H FY13 2H FY13 1H FY14 2H FY14 1H FY15 2H FY15 1H FY16

$m

Liquidity and Funding

Cash Restricted cash Receivables Inventory Trade Creditors Customer Deposits Financial debt Net debt

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Financial results

Cash flow from operations

1.1 7.4 (2.4) 0.4 0.5 0.3 5.5 0.1 5.3 0.1 5.7 0.9 0.3 0.0 3.3 8.2 3.0 0.3 0.3 2.6 0.3 0.9

• 6
• 4
• 2

2 4 6 8 10 12 14

Performance, Strategy & Outlook

CEO – AARON BEGLEY

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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 50 100 150 200 250 300

Floater Supply-Demand Model

Contracted Demand Marketed Supply Marketed Utilisation

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Offshore – Capital Drilling Equipment

PERFORMANCE

• LGS™ successfully launched
• Ongoing materials and labour

efficiencies

• Margins maintained despite

lower production rate

• Order conversion delayed

STRATEGY & OUTLOOK

• Matrix LGS™ creates a new market

in the drilling space, replacing installed equipment with Matrix LGS™

• Shift in focus in the Drilling space from the CapEx to OpEx markets due to newbuild decline
• Continuing development of SURF range and non-oil & gas applications of Syntactic Foam

Technology

• AUD continuing to assist Matrix’s competitiveness

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Offshore – Capital Drilling Equipment

Longitudinally Grooved Suppression

The Matrix LGS™ System is an integrated Drag Reduction and Buoyancy System designed for Drilling and Production Risers WHAT DOES IT DO?

• The unique and extensively tested Matrix LGS™ profile substantially reduces drag in water without

any moving parts and can be easily integrated into a buoyancy module BENEFITS

• LGS™ reduces rig downtime associated with high currents by up to 30 per cent
• Matrix LGS™ reduces the operating and capital cost of drilling deep water wells which represents

significant cost savings for Oil & Gas operators

• For Drilling contractors Matrix LGS™ provides a competitive edge for contractors as it significantly

expands the operating threshold of the rig MARKET

• In the drilling market, Matrix LGS™ provides access to the entire global fleet of deployed floating

rigs, not just newbuilds. Matrix LGS™ will replace existing, installed riser buoyancy systems

• In the SURF market, Matrix LGS™ offers an integrated drag reduction system that can reduce the

installed cost of subsea completions and riser systems

DISRUPTIVE TECHNOLOGY ADDRESSING VIV AND DRAG REDUCTION

Ultralow density syntactic foam Eliminates need for fairings Revolutionary low VIV and drag profile

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Offshore – Capital Drilling Equipment

Longitudinally Grooved Suppression

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Offshore – Capital Drilling Equipment

Longitudinally Grooved Suppression

LGS™ MODULES TESTED TO PERFORM BETTER THAN FAIRINGS

• With conservative assumptions, LGS™-equipped risers

perform as good or better than fairings-equipped risers

• Practical advantages; no installation effort when deploying

WHEN COMPARED TO BARE BUOYANCY

• Lower degree of VIV excitation and lower drag
• 20 per cent improved operability time in annualised design GoM

Eddy current profiles

• Generally, 20-30 per cent increase in raw operable current speeds

(in regions of the world investigated).

• Significantly reduced fatigue damage rates (approx. 5 – 10 times

lower damage rates)

5,000 10,000 15,000 20,000 25,000 30,000 35,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Global EPIC Capex ($US) by Region 2010-2020

Africa Asia Australasia Europe Latin America Middle East & Caspian Sea North America

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SURF and Subsea Solutions

PERFORMANCE

• Highly competitive market driving differentiation
• Committed projects subject to ‘re-bid’ resulting in

project delays

• Ongoing qualification process with operators, EPIC

contractors and OEMs STRATEGY & OUTLOOK

• Export Sales functions focused in Houston
• API 17L approval for distributed buoyancy
• Lower oil prices driving lower sanction prices for

new projects, Matrix ISOBlox™ systems and Matrix LGS™ enables reduction in overall field development costs

Forecast Drilling Activity – by Region

0.0 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0 900.0

Footage (mil)

Total NAM - Horizontal Wells USA - Horizontal Wells Canada - Horizontal Wells World Total

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Well Construction Products

PERFORMANCE

• Centralizer sales volumes remain stable with

North American losses offset by new markets STRATEGY & OUTLOOK

• US Rig count remains subdued
• Rationalisation of US logistics base to reduce

fixed costs

• Volumes and revenue continue to grow,

although more modestly than anticipated

• Target market remains attractive

• Maintained positive earnings despite softening demand for drilling equipment in

depressed oil price environment

• No interim dividend determined
• Balance sheet metrics stable with ongoing reduction in gross and net debt
• Uncertain outlook until global oil price improves and stabilises
• Current order book supports production throughout FY16
• FY16 revenue forecast at approximately $100 million
• Successful product launch of LGS™, which provides significant cost savings to

customers – highly attractive in the current oil price environment

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Summary

Reliance on third party information The information and views expressed in this presentation were prepared by Matrix Composites & Engineering Ltd (the Company) and may contain information that has been derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. No responsibility or liability is accepted by the Company, its officers, employees, agents or contractors for any errors, misstatements in or omissions from this presentation. Presentation is a summary only This presentation is information in a summary form only and does not purport to be complete. It should be read in conjunction with the Company’s 2016 interim financial report. Any information or opinions expressed in this presentation are subject to change without notice and the Company is not under any obligation to update or keep current the information contained within this presentation. Not investment advice This presentation is not intended and should not be considered to be the giving of investment advice by the Company or any of its shareholders, directors, officers, agents, employees or advisers. The information provided in this presentation has been prepared without taking into account the recipient’s investment objectives, financial circumstances or particular needs. Each party to whom this presentation is made available must make its own independent assessment of the Company after making such investigations and taking such advice as may be deemed necessary. No offer of securities Nothing in this presentation should be construed as either an offer to sell or a solicitation of an offer to buy or sell Company securities in any jurisdiction. Forward looking statements This presentation may include forward-looking statements. Although the Company believes the expectations expressed in such forward- looking statements are based on reasonable assumptions, these statements are not guarantees or predictions of future performance, and involve both known and unknown risks, uncertainties and other factors, many of which are beyond the Company’s control. As a result, actual results or developments may differ materially from those expressed in the statements contained in this presentation. Investors are cautioned that statements contained in the presentation are not guarantees or projections of future performance and actual results or developments may differ materially from those projected in forward-looking statements. No liability To the maximum extent permitted by law, neither the Company nor its related bodies corporate, directors, employees or agents, nor any

• ther person, accepts any liability, including without limitation any liability arising from fault or negligence, for any direct, indirect or

consequential loss arising from the use of this presentation or its contents or otherwise arising in connection with it.

Disclaimer

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AARON BEGLEY Chief Executive Officer PETER TAZEWELL Chief Financial Officer T: +61 8 9412 1200 E: aaron.begley@matrixengineered.com T: +61 8 9412 1200 E: peter.tazewell@matrixengineered.com

Contact details

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